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CHEMCO INTL. LEASING v. MERIDIAN ENGG.

June 7, 1984

CHEMCO INTERNATIONAL LEASING, INC., Plaintiff, against MERIDIAN ENGINEERING, INC., RICHARD SCHIERLOH and SOUTH FLORIDA MACK TRUCKS, INC., Defendants; and SOUTH FLORIDA MACK TRUCKS, INC., Third-Party Plaintiff, against SFMC COMMERCIAL CORPORATION, Third-Party Defendants.


The opinion of the court was delivered by: STEWART

MEMORANDUM DECISION

STEWART, DistrictJudge:

 Plaintiff Chemco International Leasing ("Chemco") brought suit against Meridian Engineering Inc. ("Meridian") alleging Meridian's default on payment obligations under two truck leases and one construction equipment lease assigned to Chemco by third-party defendant SFMC Commercial Corporation, ("SFMC"). Plaintiff also sues Meridian's president and principal shareholder, Richard Schierloh ("Schierloh"), and South Florida Mack trucks ("Mack"), under an agreement of guarantee executed in connection with the lease assignments. Mack asserted cross-claims against Meridian on the basis of an indemnification agreement and common law rights of subrogation.

 Briefly, the relevant background is as follows. Meridian, a St. Croix corporation, leased twelve Mack trucks and miscellaneous construction equipment from SFMC, a Georgia corporation. Three lease agreements, all dated February 28, 1978, were executed by James Bleech, then Vice President of Meridian, at the company's North Carolina office and were forwarded to SFMC's Georgia office for acceptance. On May 12 of 1978, SFMC and Chemco entered into a written financing contract. SFMC, for valuable consideration, assigned all of its right, title and interest in and to the three Meridian lease agreements to Chemco.

 At that time, Meridian also executed an "Acknowledgment and Consent to Agreement and Assignment," dated May 12, 1978, and agreed to make all subsequent payments to Chemco at its New York office.Moreover, by a "Guarantee Agreement," also dated that same day, SFMC and Richard Schierloh guaranteed "the due and punctual payment" of the money due under the lease agreement. Richard Schierloh executed that guarantee at his home in St. Croix and forwarded it to Chemco's counsel in New York.

 Defendants Schierloch and Meridian move to dismiss the complaint and cross-claims for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2). Since subject matters jurisdiction is based on diversity, we apply New York law to determine whether defendants are amenable to suit in New York State. Arrowsmith v. United Press International, 320 F.2d 219, 225 (2d Cir. 1963). Plaintiff Chemco bears the burden of proving by a preponderance of the evidence that the court has jurisdiction over defendants Meridian and Schierloch. Dogan v. Harbert Construction Corp., 507 F. Supp. 254, 257 (S.D.N.Y. 1980).

 CPLR § 302(a)(1) provides that a court may exercise personal jurisdiction over a non-domiciliary who "in person or through an agent transacts any business within the state or contracts anywhere to supply goods of services in the state." The transacting business test does not require regular and systematic activities, but does require "some purposeful activity within the state giving rise to at least some minimum contacts between the forum and the party over whom it is asserting jurisdiction." Klein v. E.W. Reynolds Co., Inc., 355 F. Supp. 886 (S.D.N.Y. 1973); see also Abbate v. Abbate, 82 A.D.2d 368, 441 N.Y.S.2d 506 (2d Dept't 1981). In making Section 302(a)(1) determinations, the court must examine the "totality of defendant's activities within the forum." Trafalgar Capital Corp. v. Oil Producers Equipment Corp., 555 F. Supp. 305, 308 (S.D.N.Y. 1983); Selman v. Harvard Medical School, 494 F. Supp. 603, 612 (S.D.N.Y. 1980), aff'd, 636 F.2d 1204 (2d Cir. 1980).New York courts recognize that where a defendant has entered the state, even for a day, to negotiate and execute a contract on which suit is eventually brought, Civ. Prac. Law's § 302(a)(1) confers personal jurisdiction. Reiner & Co. v. Schwartz, 41 N.Y.2d 648, 651-52, 394 N.Y.S.2d 844, 363 N.E.2d 551 (1977). Lastly, any application of the state's jurisdictional statute must meet the constitutional requirement that the defendant purposefully availed himself of the privilege of conducting activities within the forum state, thus invoking the benefit and protection of its laws. Wisselman v. Mt. Snow, Ltd., 524 F. Supp. 78, 79 (E.D.N.Y. 1981) (citing Hanson v. Denckla, 357 U.S. 235, 253, 2 L. Ed. 2d 1283, 78 S. Ct. 1228 (1958)).

 Jurisdiction over Meridian

 Applying these principles, we find that jurisdiction over Meridian does exist by virtue of Section 302(a)(1). James Bleech, then Vice-President of Meridian, traveled to Chemco's New York office on May 22, 1978. On behalf of Meridian, he signed two "Acknowledgment and Consent" documents which gave Meridian's consent to the assignment of SFMC's interests under the three leases to Chemco. Defendant did not enter New York merely for the purpose of making "minor modifications of a prior contractual agreement." Beldock v. Braun, N.A., 465 F. Supp. 466 (S.D.N.Y. 1979) (jurisdiction denied). Rather, Meridian's Vice President traveled to New York specifically to give the corporation's consent to the assignment, which is the basis of Chemco's suit.

 The consent to assign agreement form specifically provided that "effectiveness of this assignment [is] subject to the condition precedent that on the date hereof [May 12, 1978] there shall have been delivered to Chemco . . . [certain documents]." The documents required to effectuate Chemco's and Meridan's legal obligations were delivered by Bleech; these included the consent to assignment, two UCC-financing statements signed at the meeting on behalf of Meridian, as debtor, in favor of Chemco, as secured party, covering the trucks and construction equipment, and eight other documents relating to Meridian's corporate status.

 In light of these uncontested facts, we do not see any ultimate relevance to defendant's contention that "Bleech came to New York in May 1978 solely in connection with the assignment agreement between Chemco and SFMC and not . . . in connection with any transaction involving Meridian." Without Meridian's presence and delivery of the documents listed above, Chemco would not have entered into the business transaction. Thus, while concededly not a signatory to the assignment, Meridian's acts were essential to the transaction sued upon here. After examining the totality of defendant's activities, albeit at a single meeting in New York, we find that Meridian, through its Vice President, Bleech, purposefully availed itself of the privileges and laws of this state and is properly within the Court's jurisdiction.

 Jurisdiction over Schierloh

 Plaintiff Chemco contends that Schierloh's guarantee of Meridian's obligations to Chemco under the truck and equipment leases is sufficient to confer jurisdiction over Schierloch under the 1979 amendment to Section 302(a)(1). This amendment establishes jurisdiction over any non-domiciliary who "contracts anywhere to supply goods or services in the state" with respect to a cause of action arising from the act. N.Y. Civ. Prac. L. § 302(a)(I). Chemco argues that Meridian specifically agreed to perform its primary obligation -- payment of its lease obligations -- in New York. We agree and deny Schierloh's motion to dismiss.

 Prior to the adoption of the 1979 amendment, the "transacts any business standard" did not establish personal jurisdiction over a non-domiciliary individual who merely guaranteed performance of an obligation in New York. Ferrante Equipment Co. v. Lasker-Goldman Corp., 26 N.Y.2d 280, 309 N.Y.S.2d 913, 258 N.E.2d 202 (1970) (where a non-resident defendant negotiated and executed a guarantee agreement in New Jersey for performance of payments in New York and did not transact any business in New York, contact with New York not sufficient to confer jurisdiction). However, one of the immediate effects of the 1979 amendment was to extend "long-arm jurisdiction to non-domiciliaries who make contracts outside New York calling for performance in this state and who then totally fail to perform." N.Y. Civ. Prac. Law § 302, 1979 Practice Commentaries (McKinney). As summarized by Weinstein-Korn-Miller, "Amended CPLR 302(a)(1) contemplates that jurisdiction will be exercised not only over a non-domiciliary who contracts outside of New York and actually ships goods into the state, but also over a non-domiciliary who contracts outside the state and subsequently fails to perform any part of the contract." Weinstein-Korn-Miller, New York Civil Practice, P302.1(a) at 3-103.Directly relevant to this case is the commentators' view that contracts for "services" should ...


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